High-Definition DVDs to Outpace DVDs in 2012

A recently released report from a Monterey, California-based research firm claims that by 2009 there will be almost no video cassette recorders in use, whereas high definition digital video discs (DVDs) will have higher market share than standard definition DVDs in six years time.

“In 2006, the bulk of the $16.9 billion revenue will come from standard-definition DVD ($16.8 billion). By 2009, VHS will be virtually extinct and high-definition DVD revenue should grow to more than $2.6 billion as the format war works itself out, either via one winning format or a combination HD DVD/Blu-ray player being introduced to the market,” said Wade Holden, an analyst with Kagan Research.

Kagan believes that Blu-ray and HD DVD sales will account for 13.6% of the video sell-through revenue in 2006, 53.7% in 2012 and 68.7% in 2015. The numbers mean not only that end-users will buy more high definition DVDs over time in terms of market share, but also that more people are likely to get access to digital video discs, which essentially means increases in total available market of DVDs eventually.

“By 2015, VHS will be history and high-definition DVD will be the major-market shareholder with $18.3 billion in revenue,” Mr. Holden added.

It is interesting to note that according to Kagan, the average wholesale price of a DVD grew 3.9% to $16.70 in 2006 from $16.08 in 2004.

According to the research firm, the home video industry revenues will grow slower than previously, however, by 2015 the market’s sell-through revenue will be 57% higher compared to today. Kagan estimates that the whole home video industry revenue will drop again in 2006, off 0.4% to $24.1 billion, as a consequence of the decline in rental revenues, off 8.3% to $7.2 billion. Sell-through revenue is estimated to grow 3.4% thanks to DVD revenue hitting $16.8 billion, according to the research company.

Kagan expects rental revenue will continue to decline throughout the next decade as video-on-demand technologies gain a larger following. Total rental revenue is estimated to be $4.2 billion in 2015, posting a negative 5.8% compound annual growth rate (CAGR) for the decade. The research firm also claims that online revenue has been steadily increasing its share of the market, grabbing 17.2% in 2005, or nearly $2.8 billion Online revenue has posted a 182% CAGR since 1997, a larger growth rate than the bricks-and mortar growth of 115%.